It doesn't right now. Historically, there was no way to track (de)buffs by ID. This has been added in Cataclysm. But, alas, all IA configuration (built-in and user-defined) uses one ID to get the name for all variants of a (de)buff. Switching to an ID-only configuration would require to list all ID in the default settings and they would be some issues in some cases (macros and items).
As stated in the "Known issues and limitations" section of the addon page, this is a known "bug". It is actually not caused directly by Inline Aura but by some bug in Blizzard taint handling code. Inline Aura never calls :Show nor :Hide on the buttons.
By example, the error stack trace lists !BugGrabber as well as Inline Aura. Moreover, the error seems to come from Blizzard's function ActionButton_OnEvent, that neither addons call directly or indirectly.
It is quite possible that Inline Aura caused some taint but so far I could not find out how.
@FreakPsych : could you paste me your Defaults.lua please ?
In the latest beta (that is available from the "Other downloads" page of Curse), you should be able to find a version that does not spit shitloads of error. It should not work completely through.
As some have understood, the Defaults.lua contains settings to handle all class mechanisms that creates or relies on auras (buffs as debuffs). As with each new expansion, MoP have changed a lot of theses :
A) Some mechanisms have been removed. In this case, the spells have likely been removed, so they already should be fixed in IA.
B) Some existing mechanisms have been so heavily reworked that spell ids have changed. They look like they have been removed. I have to find which spell ids they use now.
C) New mechanisms have been added. I have to add new configuration for theses. (And do not forget the monks...)
However, I have not followed all the class changes and I am not playing WoW much these days (and I only have two 85-ers anyway). So I may have difficulties to spot B and C changes for every classes. Any help would be greatly appreciated.
It seems IA is working for the most part on beta. I will need to update the default configuration though. I am not planning to play MoP much but I will try to keep my major addons working. So any help with IA configuration is welcome.